GBP weakens ahead of important BoE policy meeting. Economists at MUFG Bank analyze the Pound outlook.

Will the BoE meet expectations for a larger 50 bps hike today?

In the near term, today’s BoE policy decision could trigger a further correction lower for the Pound if the MPC disappoints market expectations for a larger 50 bps hike to regain with inflation fighting credibility. 

There are currently 38 bps of hikes priced into the UK rate market ahead of today’s policy meeting. 

The BoE could though stick to the gradual path of 25 bps hikes today but signal that it will assess in more detail the need for a larger hike in August when the next Monetary Policy Report is released.